Oil Exports Make Houston A Player In Global Markets
Fri, October 09, 2020
For nearly four decades, Cushing, Okla. has served as the epicenter of the U.S. oil market.
The tiny town of 7,600 residents an hour’s drive northeast of Oklahoma City is the main storage facility, trading hub and delivery point for millions of barrels of oil produced in West Texas and later transported to refineries and petrochemical plants across the country. The U.S. crude benchmark — West Texas Intermediate — tracks the price of oil at Cushing.
But since the Obama administration lifted the nation’s 40-year-old ban on oil exports in December 2015, the epicenter of the U.S. oil market is shifting from the storage tanks and pipeline terminals in Cushing to the ports and ship terminals along the Gulf Coast, including the Port of Houston. The U.S., the world’s top oil producer, thanks to the shale boom, exports 3 million barrels of crude daily. Much of this oil comes from West Texas, often bypassing storage facilities in Cushing and going directly onto oil tanker ships in Corpus Christi, Houston and Beaumont. These ports accounted for 77 percent of all U.S. crude exports in 2019, according to Argus, an oil pricing agency.
“Oil coming out of the Permian is coming here, being refined and going outbound to Asia,” said Bill Diehl, president of the Greater Houston Port Bureau. “All the ports in Texas, including Houston, are benefiting from it.”
In a sign of the growing influence of Gulf Coast ports to global oil markets, two leading oil price agencies Argus and S&P Global Platts this year introduced new crude benchmarks that track the price of West Texas crude on ships departing from the Gulf Coast for international consumption. The new benchmark, American Gulf Coast Select, goes up against the longtime, well-known West Texas Intermediate, which tracks the price of crude in Cushing primarily for domestic consumption
“The center of gravity is shifting away from Cushing, from the Permian, to the Gulf Coast and increasingly, international markets and beyond,” said Richard Swann, group manager of oil pricing for Platts, which launched Platts American Gulf Coast Select in August.
“As more infrastructure has developed on the U.S. Gulf Coast to support the export market, this has created the opportunity to look at a global benchmark for the U.S. Gulf Coast,” said Bruce Fuhlin, vice president of Argus, which launched Argus American Gulf Coast Select in June.
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